When my parents call me, I will answer right away. If they ask me to do something, I'll do it quickly. If they explain something to me, I will listen respectfully. If they scold me, I will accept the reproaches, I will obey and I will commit myself to change and improve myself. If my parents do something wrong, I will urge them to change. I will do so with a kind face expression and a warm tone of voice.
If they don't take my advice, I'll repeat it when they're calmer. If they whip me, I won't hold a grudge. If an elder is standing, I will not sit. If he sits, I will only sit when told to. I will treat servants with kindness and generosity, for if I merely use my power to be obeyed their heart will not be with me. And so on. Ten pages of Rules for being a good student, in Chinese Di Zi Gui, in which neo-Confucian moral wisdom is distilled at the end of the seventeenth century.
A text written for children from the time of the Qing dynasty that Xi Jinping has made compulsory reading since 2014 not only in schools, where all students must memorize it, but also among party cadres, who periodically organize conferences to discuss it. The formation of reading groups is also encouraged in the workplace. On Youtube you can find videos, cartoons and courses of all kinds dedicated to Di Zi Gui.
Neo-Confucian social and political philosophy is a system of rights and duties according to which those higher up in the hierarchy have the right to exercise power and to be respected but have in exchange, to an even greater extent, the duty to love and respect who is entrusted to him and to do all he can for his good. The husband towards his wife, the parents towards the children, the older brother towards the younger brother, the master towards the servant, the entrepreneur towards the employees, the general towards the soldier, the political and administrative authority towards the citizens, the The avant-garde towards the masses, the Communist Party towards the state are the elements in a crescendo which dilutes the Jacobin and Leninist tradition in Confucianism and aims above all else to be harmonious.
For decades it has been argued in the West that the impetuous Chinese economic development would have generated a demand for democracy and would have eroded and then canceled the supremacy of the party. This has not been the case and with Xi the party has recovered practically complete control of the state and civil society, to the point that private companies are inserting the obligation to respect the party's directives into their statutes. The control of individual behavior is meticulous and is exercised through tens of millions of cameras with facial recognition scattered everywhere and with a sort of social license that automatically deducts points if the cameras catch you crossing the road outside the traffic jams or if you try to access prohibited websites.
In exchange for the erosion of individual freedoms, Xi Jinping, in a Confucian way, demands that the 80 million party members try to deserve the power they exercise and that, at the very least, they are not corrupt. Choose, Xi said as soon as he took office: power or money. If you want power, give up great wealth and if you want to accumulate fortunes, don't think you can exercise particular political influence for this. The great campaign that is preparing for the centenary of the foundation of the Communist Party of China which will fall on July 2021, XNUMX should be seen in this context of re-legitimization of power.
It will be a gigantic self-celebration, far greater than the one held every five years on the occasion of the congress. The revival of growth will begin as early as mid-2020 and in the wake of the results achieved, Xi will present himself at the October 2022 congress to ask for a third term until 2027. For two years, therefore, from mid-2020 to autumn 2022, China will resume being the engine of the global cycle, will raise the prices of raw materials and will drag emerging countries and major exporters such as Germany along in its recovery.
Today, China, like the United States, is in a mature stage of the cycle and is in many respects overheating. The growth and fiscal embellishment ahead of the congress two months ago was once again generated by a credit expansion. The Monetary Fund has sounded the alarm, in the particularly respectful tones it uses
always towards China, for the mountain of credit that continues to grow and Xi has shown that he is well aware of the problem.
We can therefore expect a very moderate 2018 and 2019 in terms of growth and we have already seen, as soon as the congress closed, a monetary tightening, a campaign against the excessive rises in the stock market and the slowdown (and in some cases the total block) of jobs non-essential public. The positive contribution provided by China to global growth in 2016 and 2017 will therefore become moderately negative between now and mid-2020. In 2018 this will not create particular problems, because Europe will continue to grow well and because America, provided it succeeds to approve the complex tax reform within the first quarter of next year, it will maintain the three percent growth rate it has achieved in the last six months.
At the end of 2018, however, several small and large knots will come home to roost one after the other and the picture will start to look decidedly less bright.
1) The November elections for the partial renewal of the United States Congress will give the Democrats the concrete possibility of winning back at least one of the two chambers. With Trump in the White House and a partly democratic congress, legislative activity will in this case be completely blocked, while commissions of inquiry of all kinds will flourish in preparation for an impeachment request for Trump.
2) The Quantitative tightening carried out by the Fed, which today is 10 billion a month, will rise to 2018 billion by the end of 50, a very respectable figure.
3) The Fed Funds will have gotten to 2 or 2.25 percent and will be close to the neutral rate by then. The markets will welcome the hikes up to 2 in the knowledge that they will not question growth. Looking ahead to 2019, however, they cannot help but fear negative consequences, up to a possible recession, if the Fed expresses its intention to venture above the neutral rate. If wage inflation, as it is likely, is higher, the Fed will be in serious trouble.
4) The 2020 US presidential election and the chances of a victory for anti-business candidates like Sanders and Warren will start to look closer.
5) European growth for 2019 will profile lower due to the exhaustion of the backward demand for consumption accumulated between 2011 and 2015 and to a lower strength of exports due to the Chinese slowdown and the strengthening of the euro, which will weigh on the profits of the industrial sector.
6) The first negative effects of the questioning of international trade treaties, especially NAFTA, will begin to be felt.
7) The ECB will abandon its Quantitative Easing policy by the end of 2018 and will prepare to raise rates in mid-2019.
8) The global monetary base, which has been growing since 2009 as a result of the Quantitative Easing policies, will gradually begin to fall from the third quarter of next year. The sea level on which all real and financial assets float will begin to drop and volatility will rise again.
9) China, as we have seen, will be slowing down and will need fewer raw materials. If stock markets have, as is well possible, remained strong through most of 2018, the elements for a serious correction in 2019 (if not a 20 percent bear market) are already on the horizon. On the other hand, if the White House stays with Trump or goes to a non-radical Democrat and if Xi Jinping's program does not slow down, between 2020 and 2022 calm will return.
